We have been harping on the fact that crude oil, at least in the short term, is ripe for a significant pullback. It was around $135 when we made that call, but proceeded to rise to $147 afterwards. We felt like we got stampeded by the raging oil bull at the time, but bubbles always overshoot what most people think is logical. This morning, prices are plunging about $4 to $121, its lowest price since early May.

One would think that oil might be higher this morning. The front headline on The Drudge Report last night said that Edouard could be a full-fledged hurricane by the time it makes landfall in Houston, which is the area where so much of our oil infrastructure is. When that threat eased, prices plummeted.

Another reason is that investors are finally starting to realize that our weak economy and the slowing global economy is not a recipe for oil to continue marching higher. The popular phrase “demand destruction” is a reality and can be seen in several statistics showing how much less Americans are driving these days. If we decide to drill more for domestic oil and the dollar firms up, $100 could be pessimistic in terms of a downside target for crude.

For more on Edouard’s possible impact on Oil prices, watch this: